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2008 Fourth Quarter Business Review
                                          (unaudited)




                            ...
Forward Looking Statements
          This presentation contains forward-looking information about 3M’s financial results a...
George W. Buckley
    3M Chairman, President and CEO




3
Actions

        Reduced over 2,400 permanent positions in Q4; more likely in 2009
         – One-time net cost of $219M, ...
FY08 P&L Highlights: Comparison vs. Last Year

                                                                           ...
Q408 P&L Highlights: Comparison vs. Last Year

                                                                           ...
Sales Recap: Q408 vs. Q407
                                       Total Company                                      Ex. O...
Balance Sheet & Cash Flow

                                           Q4 2007             Q3 2008             Q4 2008
    ...
2008 Global Pension & Post Retirement Benefits Status

                                  Worldwide funded status of 85%
  ...
Segment Highlights – Industrial & Transportation
                                             Fourth Quarter              ...
Segment Highlights – Health Care
                                           Fourth Quarter                                ...
Segment Highlights – Safety, Security & Protection Svcs
                                                                  ...
Segment Highlights – Consumer & Office
                                              Fourth Quarter                       ...
Segment Highlights – Display & Graphics
                                            Fourth Quarter                        ...
Segment Highlights – Electro & Communications
                                                                            ...
2009 Planning Framework
                 Organic volume
                  – -5% to -9%
                 Foreign currency
 ...
Q&A



17
2008 Fourth Quarter Business Review




                                         Leading
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3M Q4 2008 Company Earnings

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3M Q4 2008 Company Earnings

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Transcript of "3M Q4 2008 Company Earnings "

  1. 1. 2008 Fourth Quarter Business Review (unaudited) Leading Through Innovation © 3M 2009 All Rights Reserved.
  2. 2. Forward Looking Statements This presentation contains forward-looking information about 3M’s financial results and estimates and business prospects that involve substantial risks and uncertainties. You can identify these statements by the use of words such as “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe,” “will,” “target,” “forecast” and other words and terms of similar meaning in connection with any discussion of future operating or financial performance or business plans or prospects. Among the factors that could cause actual results to differ materially are the following: (1) worldwide economic and capital markets conditions; (2) competitive conditions and customer preferences; (3) foreign currency exchange rates and fluctuations in those rates; (4) the timing and acceptance of new product offerings; (5) the availability and cost of purchased components, compounds, raw materials and energy (including oil and natural gas and their derivatives) due to shortages, increased demand or supply interruptions (including those caused by natural and other disasters and other events); (6) the impact of acquisitions, strategic alliances, divestitures, and other unusual events resulting from portfolio management actions and other evolving business strategies, and possible organizational restructuring; (7) generating fewer productivity improvements than estimated; and (8) legal proceedings, including significant developments that could occur in the legal and regulatory proceedings described in the company’s Annual Report on Form 10-K for the year ended December 31, 2007 and its subsequent Quarterly Reports on Form 10-Q (the “Reports”). Changes in such assumptions or factors could produce significantly different results. A further description of these factors is located in the Reports under “Risk Factors” in Part I, Item 1A (Annual Report) and in Part II, Item 1A (Quarterly Report). The information contained in this presentation is as of the date indicated. The company assumes no obligation to update any forward-looking statements contained in this presentation as a result of new information or future events or developments. 2
  3. 3. George W. Buckley 3M Chairman, President and CEO 3
  4. 4. Actions Reduced over 2,400 permanent positions in Q4; more likely in 2009 – One-time net cost of $219M, with 2009 savings of $235M Temporarily furloughed > 1,000 additional factory workers Maintaining only essential contract workers Deferring merit pay increases – 2009 savings of $100M Modifying policy on banked vacation – $100M savings in both 2009 and 2010 Cutting 2009 cap ex by > 30% Halting stock repurchases until environment improves 4
  5. 5. FY08 P&L Highlights: Comparison vs. Last Year 3M ($ in Millions) 2007 2008 Change ex. Optical Except per share amounts Net Sales $24,462 $25,269 3.3% 6.5% Gross Margin 48.2% 47.5% -0.7 pts ---- SG&A $4,907 $5,134 4.6% 5.2% R&D and related exp. $1,372 $1,391 1.4% 3.4% Op. Income $5,512 $5,487 -0.4% 9.2% +0.5 pts Op. Income % 22.5% 21.7% -0.8 pts Tax Rate 31.8% 30.9% -0.9 pts Net Income $3,648 $3,654 0.2% EPS $4.98 $5.17 3.8% *Excludes special items. Refer to 3M’s January 29th, 2009 press release for a complete list and explanation of these items. 5
  6. 6. Q408 P&L Highlights: Comparison vs. Last Year 3M ($ in Millions) Q4 2007 Q4 2008 Change ex. Optical Except per share amounts Net Sales $6,206 $5,509 -11.2% -8.1% Gross Margin 46.9% 45.1% -1.8 pts -0.7 pts SG&A $1,267 $1,175 -7.3% -6.7% R&D and related exp. $357 $337 -5.6% -3.5% Op. Income $1,290 $974 -24.4% -14.2% -1.3 pts Op. Income % 20.8% 17.7% -3.1 pts Tax Rate 30.7% 27.6% -3.1 pts Net Income $863 $676 -21.6% EPS $1.19 $0.97 -18.5% *Excludes special items. Refer to 3M’s January 29th, 2009 press release for a complete list and explanation of these items. 6
  7. 7. Sales Recap: Q408 vs. Q407 Total Company Ex. Optical WW US Int’l WW (8.1%) Sales growth - USD (6.0%) (14.1%) (11.2%) (0.3%) Less: divestiture impact (0.7%) (0.1%) (0.3%) (7.8%) Growth adjusted for divestitures (5.3%) (14.0%) (10.9%) (5.3%) Less: currency impact ----- (7.5%) (4.9%) (2.5%) Total local currency growth (5.3%) (6.5%) (6.0%) Components of Total LC Growth (8.7%) Volume – organic (13.1%) (10.1%) (11.0%) 2.6% Selling price changes 3.1% 1.0% 1.7% (6.1%) Organic local currency growth (10.0%) (9.1%) (9.3%) 3.6% Volume – acquired 4.7% 2.6% 3.3% 7
  8. 8. Balance Sheet & Cash Flow Q4 2007 Q3 2008 Q4 2008 ($ in Millions) Free Cash Flow $1,252(b) $792(a) $662 Net W/C Turns 5.3 5.0 4.5 Inventories $2,852 $3,078 $3,013 Slowing factories Receivables-Net $3,362 $3,763 $3,195 Slow Nov/Dec sales Cap-ex $391 $376 $463 Expect to cut by > 30% in ‘09 Dividends Paid $341 $348 $346 ‘08 per-share increase of 4% Share Repurchases $483 $515 $34 Preserving cash (a) Includes U.S. pension contribution of $200 million in Q3 2008. Excludes certain special items that impacted cash flow. Refer to 3M's January 29th, 2009 press release for an explanation of these items. (b) Refer to 3M’s January 29th, 2009 press release for a complete discussion of net working capital turns and free cash flow Note: (non-GAAP measures). 8
  9. 9. 2008 Global Pension & Post Retirement Benefits Status Worldwide funded status of 85% $B – U.S. 89% – International 75% 2008 actual U.S. plan asset performance of (13.6%) 2009 U.S. plan assumptions – Return on assets 8.5% – Discount rate 6.14% 2009 estimated worldwide funding of $600M to $850M 2009 estimated EPS headwind of ($0.07) for pension and post-retirement benefits 9
  10. 10. Segment Highlights – Industrial & Transportation Fourth Quarter Q4 Highlights • Local-currency sales down 6.3% including 3.2% benefit Operating from acquisitions (11.3%) Income Margins Q4 ’07 Q4‘08 • Positive sales growth in automotive aftermarket with especially good growth in autobody abrasives; operating 19.1% 14.3% income growth in energy markets • Local-currency sales declines in all regions (33.4%) • Operating margins of 14.3% Q4 ‘07 Q4 ‘08 Q4 ‘07 Q4 ‘08 Sales Operating Income Full Year Highlights • Local-currency growth of 4.6%, including 3.9% from Full Year acquisitions; 8 acquisitions closed including Meguiar’s +7.6% • Outstanding sales growth in adhesives and tapes, Operating automotive aftermarket and abrasives businesses Income Margins 2007 2008 • Strong market penetration in BRICP 20.7% 19.7% • Announced new Renewable Energy unit to address global demand for alternative power sources • Full-year profit increase of 2.4% with strong operating +2.4% margins of 19.7% 2007 2008 2007 2008 Sales Operating Income *Excludes special items. Refer to 3M’s January 29th, 2009 press release for a complete list and explanation of these items. 10
  11. 11. Segment Highlights – Health Care Fourth Quarter Q4 Highlights • Local-currency sales growth of 4.5% including 2.2% (2.1%) from acquisitions Operating Income Margins • Solid growth in core infection prevention and skin & Q4 ’07 Q4 ‘08 wound care products 27.0% 28.9% • Entered licensing contract in drug delivery to collaborate on dry powder inhalation technology +4.5% • Sales growth led by the US and Asia Pacific • Excellent operating margin of 28.9% with operating income up 4.5% Q4 ‘07 Q4 ‘08 Q4 ‘07 Q4 ‘08 Operating Income Sales Full Year Highlights Full Year • 6.8% local-currency sales growth including 1.7% from 4 +8.2% Operating closed acquisitions in 2008, including TOP-Service, Imtec Income Margins and Solumed 2007 2008 • Double-digit growth in medical, dental and orthodontic 27.5% 28.7% businesses • Sales growth in all geographic regions, led by double-digit growth in Asia Pacific and Latin America and solid growth +13.0% in Europe and the U.S. • Drove outstanding full-year operating margin of 28.7% with profits up 13% 2007 2008 2007 2008 Operating Income Sales *Excludes special items. Refer to 3M’s January 29th, 2009 press release for a complete list and explanation of these items. 11
  12. 12. Segment Highlights – Safety, Security & Protection Svcs Q4 Highlights Fourth Quarter • Local-currency growth of 13.2% including 15.7% from +2.9% Operating acquisitions, primarily Aearo Technologies Income Margins Q4 ’07 Q4 ‘08 • Growth led by the personal protection equipment business 17.8% 16.7% • Track and trace business leads profit growth with new product solutions for libraries (3.5%) • Positive sales growth in the US and Asia Pacific • Operating income of $128 million with margins of 16.7% Q4 ‘07 Q4 ‘08 Q4 ‘07 Q4 ‘08 Sales Operating Income Full Year Highlights Full Year • Local-currency growth of 18.3%, including 14.1% from +18.6% acquisitions, primarily Aearo Technologies Operating Income Margins • Completed divestiture of HighJump Software 2007 2008 20.9% 21.3% • Robust demand continued in personal protection, building and commercial services and RFID solutions • Double-digit sales growth in every geographic region; +20.9% good market penetration in developing countries, especially BRICP countries • Strong operating income increase of 20.9% with full-year 2007 2008 2007 2008 operating margins of 21.3% Sales Operating Income *Excludes special items. Refer to 3M’s January 29th, 2009 press release for a complete list and explanation of these items. 12
  13. 13. Segment Highlights – Consumer & Office Fourth Quarter Q4 Highlights • Local-currency sales down 6.5% including 0.2% Operating (11.2%) benefit from acquisitions Income Margins Q4 ’07 Q4 ‘08 • Weakness across all businesses and in every 18.1% 15.5% geographic region, with home care and do-it-yourself businesses posting the positive local-currency sales growth (24.1%) • Good performance by Nexcare™ first-aid skincare and bandages, Scotch-Brite™ scouring products and Q4 ‘07 Q4 ‘08 Q4‘07 Q4 ‘08 Filtrete™ air filtration solutions Sales Operating Income • Operating margins of 15.5% Full Year Full Year Highlights +1.1% Operating • Local-currency sales down 0.3% for 2008, including Income Margins 0.4% benefit from acquisitions 2007 2008 • Full-year sales growth in home care, consumer health 20.3% 19.8% care and do-it-yourself businesses • Double-digit full-year sales and operating income growth in Asia Pacific and Latin America, with solid (1.5%) single-digit growth in Europe • Difficult US office markets and residential housing 2007 2008 2007 2008 construction markets persist Sales Operating Income • Operating margins of nearly 20% *Excludes special items. Refer to 3M’s January 29th, 2009 press release for a complete list and explanation of these items. 13
  14. 14. Segment Highlights – Display & Graphics Fourth Quarter Q4 Highlights • Local-currency decline of 25.8%; sales down 7.7% Operating excluding Optical Systems Income Margins (28.4%) Q4 ’07 Q4 ‘08 • Optical Systems sales and profits down 48% and 94%, respectively due to rapid contraction of LCD market 25.8% 10.2% • Local-currency sales in traffic safety systems up nearly 3% including 2.3% from acquisitions (71.6%) • Media and advertising slowdown negatively impacts commercial graphics Q4 ‘07 Q4 ‘08 Q4 ‘07 Q4 ‘08 Sales Operating Income • Strong local-currency growth in Latin America • Operating margins of 10.2% Full Year Full Year Highlights Operating • Local-currency sales down 17.9% for 2008 (16.6%) Income Margins 2007 2008 • Aggressively addressing cost structure to offset 28.5% 19.1% weak top-line growth, particularly in optical film business • 2-lamp energy saving story in LCD monitors continues to gain traction (44.1%) • MPRO, 3M’s first handheld digital projector, featured by Popular Science and covered 2007 2008 2007 2008 extensively at CES by national media Sales Operating Income • Full-year operating income margins of 19.1% *Excludes special items. Refer to 3M’s January 29th, 2009 press release for a complete list and explanation of these items. 14
  15. 15. Segment Highlights – Electro & Communications Q4 Highlights Fourth Quarter • Local-currency sales down 12.3%, including 0.3% Operating benefit from acquisitions Income Margins Q4 ’07 Q4 ‘08 (15.3%) • Electronic solutions and electronic markets materials saw orders cancelled due to economic conditions 17.8% 14.5% • Electrical markets won another contract from a major utility for its ACCR overhead power cable solution (30.6%) • Operating margins of 14.5% Q4 ‘07 Q4 ‘08 Q4 ‘07 Q4 ‘08 Sales Operating Income Full Year Highlights • Sales in local currency down 1.7% for 2008, including Full Year 0.4% benefit from acquisitions +1.0% • Sales growth led by international performance Operating Income Margins particularly Asia Pacific and Latin America 2007 2008 • Electrical markets and electronics markets materials 19.3% 19.3% drove solid growth • Soft telecommunications infrastructure market worldwide +1.1% • Continued strong operational discipline with operating margins of 19.3% 2007 2008 2007 2008 Sales Operating Income *Excludes special items. Refer to 3M’s January 29th, 2009 press release for a complete list and explanation of these items. 15
  16. 16. 2009 Planning Framework Organic volume – -5% to -9% Foreign currency – -6% to -7% Earnings-per-share – -9% to -17%, or $4.30 to $4.70 Free cash flow will approximate net income, however pension and severance funding will be a wild card *Excludes special items. 16
  17. 17. Q&A 17
  18. 18. 2008 Fourth Quarter Business Review Leading Through Innovation © 3M 2008. All Rights Reserved.
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